Businesses see rise in counterfeiting

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Nicholas Ostergaard has a new policy at the Jukebox, the deli and pub he owns in Indian Trail, N.C.: “No more hundreds.”

The Jukebox now accepts nothing bigger than a $50 bill after a teenager paid for an $11 order last month with what turned out to be a fake $100 bill and walked away with $89 in change.

“I instantly thought it was fake,” Ostergaard said. But when he checked the bill with a detector pen — a common device that uses iodine to verify U.S. currency — “it came up it was real.”

That made the deli another victim in what the U.S. Secret Service said was an ambitious counterfeiting operation that has spread as much as $60,000 in phony currency at businesses from Hickory to Greensboro, in central North Carolina, just since May.

Law enforcement officials said the operation was probably quashed when Union County sheriff’s deputies arrested two teenagers last month. But before then, they said, the teens were responsible for creating hundreds of fake $100 bills good enough to fool shop owners, bank tellers and even detector pens on initial inspection.

The evidence is only anecdotal at this point, but law enforcement officials and business owners across the country say they have seen a significant spike in the circulation of counterfeit currency since the economy started to sour more than a year and a half ago:

More than $1,500 in counterfeit bills found its way into the cash registers of businesses in South Strabane Township, Pa., last weekend.

A counterfeiting ring passed at least 10 fake $100 bills in Collier County, Fla., before three people were arrested last month.

At least 17 victims were swindled with counterfeit bills over the Fourth of July weekend in Elkhart, Ind., where police recovered roughly $1,500 in fake cash. One of the victims was the City of Elkhart itself, which took in at least 200 phony dollars at municipal installations.

“Sometimes, the economy is related to an increase in crime,” said Randel Henderson, the deputy police chief in DeLand, Fla., near Orlando. “If the economy is bad ... and [people] have the technology to make money, historically they do.”

Scope of losses hard to calculateThere is no way to get a precise measurement of the counterfeiting problem, the Secret Service and other law enforcement officials say. Federal crime statistics for 2008, the first full year of the recession, are not yet complete, and in any event, by definition, a successful counterfeit is never detected and accounted for.

The Secret Service, the federal agency responsible for investigating counterfeiting, said it remains a minor issue, estimating that fake bills make up three-tenths of 1 percent of currency in circulation, up from about one-tenth of 1 percent 10 years ago.

That may not seem like much, but with hundreds of billions of dollars circulating at any one time, it’s a lot of funny money — about $2.6 billion, based on Federal Reserve calculations of total paper currency in circulation in June, the last month for which figures were available.

The figure is actually likely to be even higher, because counterfeiters generally prefer the bigger bills. They make $20 bills and larger because the ones, fives and tens that make up much of what is in your wallet simply aren’t worth their time.

That’s how Christopher Paul Runge of Denton, Texas, operated. Runge was charged last month with printing thousands of dollars in fake twenties, fifties and hundreds; in a jailhouse interview with NBC station KXAS of Dallas, Runge admitted running the operation and described how it worked.

Runge and his alleged accomplices would wash $5 bills with a solvent to remove the ink. Once the ink was gone, they would use a computer printer to produce higher-denomination bills. Because the paper under the ink was real U.S. currency, counterfeit-detecting iodine pens would indicate that the bills were legitimate.

Police said they were tipped off when an accomplice goofed and tried to pass some lower-quality $20 bills at a pharmacy, whose cashier called police. The majority of the bills were of much better quality and have yet to be detected, Runge said, boasting that “some of these bills will stay in circulation for quite a while.”

Fake bills don’t have to be perfect
The technique is the same one used by the counterfeiters in North Carolina and in most relatively successful operations elsewhere.

Since 1989, when the Secret Service spotted the first of the so-called Supernotes — real U.S. money bleached and reprinted to pass as higher-denomination bills — the U.S. Treasury has made a slew of changes in the design of currency to make it harder to counterfeit: Some bills have changed colors; portraits of the dead white men that grace them have been re-engraved and set off-center; hard-to-mimic multicolor security threads have been embedded in the paper; even harder-to-mimic watermarks have been incorporated.

In the government’s eyes, those measures have largely worked. It is much more difficult to get a fake note past sophisticated tests than it used to be, often when it is deposited at a Federal Reserve Bank, the Secret Service said.

The problem is that the same computer technology that makes bills so hard to reproduce in detail also makes it easier to create fake bills that are just good enough to get by the convenience store clerk, the gas station attendant and — crucially — the iodine detector pen. While the Fed may catch the fake later, the counterfeiter is far away with his profit.

Even the Secret Service acknowledged in its recently released 2008 annual report that “the widespread use of personal computers and advancements in digital printing technology has provided more individuals the opportunity to manufacture a passable counterfeit note with relative ease.”

And because federal law makes no provision for reimbursing the victim of a counterfeiter, it’s the business owner who’s left holding the bag.

Since a bleach-and-print counterfeiting ring began victimizing businesses in Ocean Springs, Miss., last month, Holly Skinner, general manager of Mediterraneo restaurant, has directed her clerks to take “anything above a 50” to the manager on duty for immediate inspection.

“You’re not getting one over on a bank or on the government,” Skinner said. “You’re cheating any local business that’s — especially in this economy — doing their best and struggling through and trying to stay open for the public.”

Misty Koperski, a clerk at Coffins Corner, a convenience store in Grand Island, Neb., was handed a fake $20 bill a few weeks ago by a man trying to buy cigarettes.

“You know, you are just out,” Koperski said. “You might as well have lit up the money and burned it, because it’s gone.”

‘In Dog We Trust’Law enforcement officials say you should be able to spot most funny money if you’re reasonably observant, even with fake bills that are reprinted over real money.

The telltale clue is often the watermark, which is the shimmery portrait that “reflects back and forth much like a hologram does on a credit card,” said Jeff Kelly, a Secret Service agent in southern Florida. It takes more sophistication than a garden-variety counterfeiter can manage to pull off faking one of those.

The key is that the watermark is supposed to match the portrait on the front — on a $50 bill, they’re both supposed to be the same image of Ulysses S. Grant, for example.

In other words, if you’re handed a legitimate-looking $50 bill but the watermark shows Abraham Lincoln, you’ve actually got a $5 bill. Authorities said businesses would catch a lot of fake bills if their employees would take only a few seconds to make that simple inspection at the time of the transaction. But because they don’t, even obvious fakes regularly slip through.

That’s what happened last week at Lean Bean Espresso in Coeur d’Alene, Idaho, where a man persuaded an employee to change a $100 bill. Only later did she notice that it was phony.

The signs were pretty obvious: In the portrait, Benjamin Franklin’s name was misspelled as “Franken”; on the back, the motto read “In Dog We Trust.” And on the front was an easy-to-read note: “For motion picture use only.”